Competition | January – March 2025
Enforcement Matters
Supreme Court provides clarity on when to approach the CCI during Insolvency and Bankruptcy proceedings
On 29 January 2025, while dealing with an appeal filed by Independent Sugar Corporation Limited (“INSCO”) which challenged veracity of the procedure followed by AGI Greenpac Limited (“AGI”) in its proposed acquisition of Hindustan National Glass and Industries Limited (“HNG”) (“AGI Transaction“) pursuant to the provisions of the Insolvency and Bankruptcy Code, 2016 (“IBC”), the Supreme Court held that CCI approval must be obtained before the approval of a resolution plan by the committee of creditors (“CoC”).
While setting aside (a) the CCI approval obtained by AGI which was subject to the fulfilment of certain conditions, and (b) the CoC approval that was earlier upheld by the National Company Law Appellate Tribunal (“NCLAT”), the Supreme Court inter alia observed that owing to the fact that the CCI approval could result in material changes to a resolution plan – if the CoC approval is granted before the CCI approval, then the CoC would not have the opportunity to consider the changes being imposed by the CCI.
Additionally, with respect to certain averments relating to the interpretation of provisions of the IBC which dealt with the timing of approaching the CCI, it was noted that the abovementioned interpretation was in alignment with legislative intent i.e. to ensure combinations are scrutinized for anti-competitive effects before consideration by the CoC. Further, with regard to the process adopted by the CCI at the time of conducting its inquiry into the anticompetitive impact of the AGI Transaction, the Supreme Court noted that show cause notices issued by the CCI (if any), should not only be sent to the acquiring entity but also to the target entity in the transaction being notified to the CCI. Consequently, based on this reasoning the Supreme Court nullified AGI’s resolution plan and directed the CoC to reconsider plan submitted by INSCO and/or any other resolution plans that may have also obtained the requisite CCI approvals.
NCLAT reduces Google’s penalty from INR 9.3 billion to INR 2.1 billion while partially upholding CCI’s findings
The NCLAT, in its order dated 28 March 2025, has reduced the penalty imposed on Alphabet Inc. (“Google“) from INR 9.3 billion (USD ~109.50 million) to INR 2.1 billion (USD ~25.34 million), while partially upholding the CCI’s findings that Google had abused its dominance with respect to the implementation of its billing systems through the Google Play Billing System (“GPBS“).
Taking note of the distinct features of UPI payment apps which are not substitutable with other digital payment methods the NCLAT upheld the CCI’s narrow market definition of ‘the market for apps facilitating payment through UPI in India’ and assessed whether Google’s conduct amounted to an abuse of dominance. Notably, in this regard the NCLAT reiterated that in order to establish an abuse of dominance claim, an effects analysis must be undertaken. Further it was observed such an analysis should be (a) undertaken on the basis of conduct that has actually taken place and not hypothetical future conduct; and (b) the scope of the effects analysis should include, both, conduct that causes actual harm and that has the potential of causing harm to competition.
With respect to the merits of the case, the NCLAT upheld the CCI’s findings that (a) Google imposed unfair conditions on app developers by requiring them to mandatorily use GPBS for paid apps and in-app purchases since it inter alia restricted users and developers’ ability to choose alternate payment processors and methods; and (b) Google leveraged its dominance in the licensable mobile OS and app store markets to protect its position in the downstream UPI payments market, since Google’s various policies relating to payment integration gave Google Pay a competitive advantage. However, with respect to the CCI’s findings that Google’s conduct had resulted in limiting technical development and a denial of market access, the NCLAT while dismissing these findings, took note of Google’s small market share in the UPI payments market and inter alia observed that the mandatory imposition of GPBS could not have hindered technical development, and there was no evidence of market foreclosure or exclusion.
Further, while deciding on the CCI’s findings that Google was imposing discriminatory pricing because GPBS was not applicable to YouTube, the NCLAT accepted Google’s averments that a comparison of fees applicable to YouTube and third party apps under the GPBS would not be tenable because the revenue earned by YouTube would be the revenue earned by Google itself, since YouTube is owned by Google. Lastly, while reducing the quantum of penalty imposed the NCLAT inter alia reasoned that the penalties imposed must be linked to the infringing conduct and as such should be based on Google’s relevant turnover from (a) app purchases, in-app purchases, and subscription purchases made by Indian users; (b) developer registration fee and sale of digital content; and (c) advertisements on Google Play and In-App advertisement rather than its entire turnover from India.
NCLAT dismisses abuse of dominance allegations against Asian Paints
On 19 February 2025, the NCLAT upheld the CCI order which dismissed allegations against Asian Paints that claimed it had abused its dominance and was in breach of the provisions of the Competition Act that dealt with anti-competitive agreements.
These allegations were inter alia based on the fact that the appellant faced financial and reputational losses because it had entered into a commercial arrangement with JSW Paints, and as a consequence of this, Asian Paints downgraded the appellant’s retailer status from ‘critical retailer’ to ‘colour world’. However in this regard, the NCLAT noted that the allegations against Asian Paints were misplaced as the revocation of appellant’s critical retailer status was due to consistent reduction in the offtake of the products and not because of its separate dealings with JSW Paints.
The tribunal also emphasized the importance of approaching any forum with clean hands as the appellant had not disclosed the fact that its critical retailer status was restored prior to filing of the information with the CCI and moreover, the appellant sought interim relief in the form of being reinstated as critical retailer even though it had already been reinstated as such.
CCI dismisses abuse of dominance allegations against Microsoft
On 3March 2025, the CCI dismissed abuse of dominance allegations against Microsoft Corporation and its Indian entity (“Microsoft“). Notably, the informant alleged that Microsoft’s pre-installation of the Microsoft defender antivirus (“Defender“) as the default antivirus on the windows operating system inter alia resulted in the imposition of unfair conditions, anti-competitive bundling, hindered market access and development and also raised concerns about the implementation of the Microsoft Virus Initiative (“MVI“).
At the time of dismissing these allegations the CCI observed that Microsoft’s inclusion of Defender does not impose unfair conditions on users or hinders competition as alternative antivirus software remains available in the market and original equipment manufacturers can pre-install competing security solutions.
The CCI also noted that Microsoft’s actions had not impeded technical or scientific advancements in the cybersecurity market, as third-party antivirus firms continued to develop new features and remain competitive. On the allegations pertaining to illegal tying and bundling, the CCI held that Defender is integrated as a security feature rather than a separate product. Further, the CCI found no coercion by Microsoft as it did not force consumers to use Defender exclusively. Moreover, there was no substantial foreclosure of the antivirus market, as several major cybersecurity firms such as Norton, McAfee, and Bitdefender continued to thrive.
Regarding claims that Microsoft restricted access to the Microsoft store (and consequently the Windows operating systems) only to members of the MVI programme, the CCI concluded that participation in the MVI programme was not mandatory for antivirus developers to distribute their products, thus non-MVI apps could also coexist with Defender.
CCI orders the director general to investigate abuse of dominance allegations against Tamil Nadu State Marketing Corporation Limited
On 25 March 2025, the CCI ordered the director general (“DG”) to investigate the conduct of the Tamil Nadu State Marketing Corporation Limited (“TASMAC”) to determine whether it was abusing its dominance by preferencing certain specific brands of beer (such as “SNJ10000” and “British Empire”) over other beer brands available in the market.
In its order, the CCI at the outset noted that the provisions of the Competition Act would be applicable to TASMAC, since it was an entity involved in economic activities (i.e. distribution and sale of alcoholic beverages in the state of Tamil Nadu) and further noted that due to TASMAC’s monopolistic market position and the lack of competitive pressure/forces in the relevant market, it appeared that TAMSAC held a dominant position in the market.
While dealing with TAMSAC’s averments that monthly procurements were undertaken after using certain software that automatically generated procurement details based on a weighted average sales calculation, the CCI observed that the demand for specific brands from the retail stores was not taken into account by the said formula, which instead placed reliance on historic sales in the 3 months preceding and the month immediately preceding the month of procurement. To this end, the CCI also observed that on account of this flaw, a brand which has already been stocked and sold (more than other brands) in the previous month will automatically be given higher orders in the present month, perpetuating the status quo of the sales and inventory position observed in the previous months. Additionally, it was also observed that the shares of brands of the two manufacturers i.e Kals Breweries Pvt. Ltd. and SNJ Breweries Pvt. Ltd. were significantly higher compared to other known beer brands. Relying on these facts, the CCI concluded that TASMAC prima facie appeared to be abusing its dominant position by limiting market access to certain brands of beer in the state of Tamil Nadu and consequently, ordered the DG to investigate the matter.
Merger Control
CCI imposes a penalty of INR 4 million on Goldman Sachs for gun jumping
On 14 January 2025, the CCI imposed a penalty of INR 4 million (USD ~46,776.48) on Goldman Sachs (India) Alternate Investment Management Private Limited, the investment manager of Goldman Sachs AIF Scheme-1 (GS AIF) (collectively “GS“) for failing to notify a transaction involving the subscription to optionally convertible debentures (“OCDs”) of Biocon Biologics Limited (“Biocon”) representing 3.81% of the shareholding of Biocon (on a fully diluted basis) (“Proposed Transaction“).
While taking note of the averments made by GS that the Proposed Transaction would be able to avail the benefit of the minority acquisition exemption (“Minority Acquisition Exemption“) that is applicable when (a) there is an acquisition of less than 25% of the target entity; (b) there is no acquisition of control; and (c) the transaction is taking place solely as an investment (“SI“) or in the ordinary course of business (“OCB“), the CCI at the outset delved into the nature of rights that GS acquired in Biocon pursuant to the Proposed Transaction and thereafter assessed whether such rights would meet the criteria discussed in the Minority Acquisition Exemption.
To this end, it was noted that pursuant to the Proposed Transaction GS would inter alia acquire:
- Reserved Matter Rights, that could be exercised jointly with other investors as part of an investor majority;
- Information Rights, pursuant to which GS would have access to (i) certified true copies of minutes of board/ committee/ shareholder meetings (“Minutes Rights“); and (ii) information relating to any direct change in certain shareholdings, and access to certified true copies of the latest capitalization table of Biocon; and
- Access Rights, that provided GS with access to the premises and personnel of Biocon.
Notably in its decision, the CCI concluded that GS’ Information Rights and Minutes Rights went beyond the scope of ordinary shareholder rights, and also rejected averments that these rights were available to all shareholders of Biocon and as such should be considered ‘ordinary rights’. Further clarifying that, the determination of ‘ordinary rights’ should not be done in the context of the rights available to the shareholders of a particular target company but rather rights generally available to passive investors. This order also reasoned that access to board meeting minutes, which contained confidential and commercially sensitive information, suggested a strategic interest rather than a pure investment motive.
Additionally, it was observed that any transaction which is made with the intent of remaining invested for a relatively longer period and involves the acquisition of any additional rights (compared to the rights of an ordinary shareholder) cannot be considered as in the ordinary course of business. Consequently on the basis of these observations, the CCI concluded that the Proposed Transaction would not have been able to avail the benefit of the Minority Acquisition Exemption since it was neither ‘solely as an investment’ nor had it been made ‘in the ordinary course of business’ and as such ought to have been notified.
CCI imposes a penalty of INR 500,000 on Matrix Pharma and others for gun jumping
On 7 March 2025, the CCI imposed a penalty of INR 500,000 (USD ~5,847.06) on Matrix Pharma Private Limited (“Matrix“) and its related entities for failing to notify subsequent material changes to the structure of a transaction that had already been approved by the CCI.
Pursuant to the transaction approved by the CCI, Matrix was slated to acquire Tianish Laboratories Private Limited (“Tianish“), with funding from Kotak Strategic Situations India Fund II and Kotak Alternate Asset Managers Limited (“Investors“). However, after the CCI approved this transaction, and in order for Matrix to have sufficient capital for the acquisition of Tianish, it secured capital through alternate sources of funding (“Alternate Funding“).
In relation to this Alternate Funding, the CCI inter alia noted that:
- Acquirer Funding: The shareholding and control structure of Matrix was changed, such that the erstwhile majority shareholder of Matrix (i.e. Mr Venkata Pranav Reddy Gunupati (“Pranav“)) would now indirectly own Matrix through various holding companies (“Acquirer Holding Entities“), one of which included Mudra Lifesciences Private Limited (“Mudra Lifesciences“). Furthermore, the CCI noted that Pranav through the various Acquirer Holding Entities, had not only carried out the capital infusion into Matrix but also changed the (earlier notified) structure of the transaction prior to intimating the CCI of the same; and
- Kingsman Funding: Kingsman Wealth Fund PCC Aurisse Special Opportunities Fund (“Kingsman“) would subscribe to compulsory convertible preference shares (“CCPS“) of Mudra Lifesciences, such that after conversion, Kingsman’s shareholding in Mudra Lifesciences would be 42.75% on a fully diluted basis. Notably this leg of the Alternate Funding was notified to the CCI under the green channel route.
- The Alternate Funding was necessary to complete the proposed acquisition of Tianish and as such the Alternate Funding was inter-connected to the proposed acquisition of Tianish.
At the time of coming to its findings that the revised transaction structure ought to have been notified prior to the consummation of any of the funding steps, the CCI inter alia reasoned that (a) owing to the change in the Acquirers’ shareholding and control structure, the new transaction structure had materially deviated from what was originally approved by the CCI; (b) certain steps of the Acquirer Funding had already been completed at the time of approaching the CCI for a pre-filing consultation and that the CCI was only subsequently notified of the revised transaction structure after the completion of the (inter-connected) Acquirer Funding; and (c) the procedural requirement to notify a transaction to the CCI, would be applicable irrespective of whether there were overlaps.
That said, the CCI did not find the Kingsman Funding or the proposed funding through the Investors to be in contravention of the Competition Act because Kingsman Funding had been notified to the CCI under the green channel route; and the Investor funding had not been consummated. Further it may be noted that, at the time of determining the quantum of penalty to be imposed, the CCI considered mitigating factors such as voluntary disclosure of the change in transaction structure and extension of cooperation by making material / documents available.
CCI holds Torrent Power Limited liable for gun jumping
On 14 January 2025, the CCI found Torrent Power Limited (“TPL”) to be in contravention of the gun jumping provisions of the Competition Act for failing to notify its acquisition of a 51% stake in Dadra and Nagar Haveli and Daman and Diu Power Distribution Corporation Limited. However, no penalty was imposed on account of mitigating factors. Notably, this transaction was undertaken through a bidding process pursuant to a restructuring scheme under the Electricity Act, 2003 (“Electricity Act”) where inter alia strict timelines were imposed on the winning bidder to close the transaction.
In its order the CCI, while dealing with the averments relating to the overlapping jurisdiction of the CCI and the Joint Electricity Regulatory Commission to regulate transactions in the electricity sector, it was held that the provisions of the Competition Act and the Electricity Act should be interpreted using the principle of harmonious construction. Further in this regard the CCI emphasized that while the Electricity Act governs sector-specific issues like tariffs and access, the Competition Act is a special statute for regulating competition across all sectors, including electricity. Consequently the CCI held that TPL was required to notify the transaction before its consummation i.e., TPL should have filed the notice with the CCI immediately after issue of letter of intent in favour of TPL by the bid authority, but before the payment of consideration.
The CCI also emphasized that TPL should have sought CCI approval even if (a) there was lack of financial details of the target; and (b) the tendering process did not account for or build in timelines for CCI approval. That said, the CCI decided to not impose any penalty on TPL after considering factors such as (i) the structural issues inherent to the bidding process; (ii) ambiguity due to overlapping provisions in the two special acts, i.e., Competition Act and Electricity Act; (iii) no appreciable adverse effect on competition in the relevant market; and (iv) cooperation by TPL in respect of the ongoing proceedings.
Developments in the Legal Framework
Updated Regulations on the Recovery of Monetary Penalty has come into effect
On 25 February 2025, the CCI notified the Competition Commission of India (Manner of Recovery of Monetary Penalty) Regulations 2025 (“2025 Regulations”), which repealed the existing 2011 regulations. These regulations streamlined the process of recovery of penalty. The 2025 Regulations introduced some major concepts/changes such as the (a) introduction of the concept of “person in default”; (b) recovery of penalty from legal heir in case the person in default is deceased; (c) increase in timeline from 30 days to 60 days for depositing the penalty as per the issued demand notice; (d) deduction in the interest on penalty from 1.5% to 1% in instances where the amount specified in the demand notice is not paid within the given period; and (e) postponement of the recovery proceedings by the CCI indefinitely if the income tax authority to which the reference has been made by the CCI initiates recovery proceedings.
For more information contact:
Zenia Cassinath
Practice Head – Competition
zenia.cassinath@veritaslegal.in
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VERSED by Veritas Legal intends to provide the readers with an overview of some of the noteworthy legal developments for education / information purposes only. This newsletter should not be construed or relied on as legal advice, or to create a lawyer-client relationship. Readers should reach out to us for any specific factual or legal questions or clarifications; and are encouraged to seek legal advice before acting on any information provided herein. The enclosed information is available in the public domain and shall not be construed as dissemination of any confidential information.